IBM ‘Messaging’ Good, AAPL’s Losing Some Magic, Says UBS

By Tiernan Ray

In what seems a departure from the usual counting of units, UBS hardware analyst Steve Milunovich today offers a long disquisition on the matter of corporate tag lines, suggesting that International Business Machines (IBM) is perhaps doing best at sound bites at the moment, while Apple (AAPL) seems to have lost the flair of late founder Steve Jobs.

Comparing tech “tag lines” to the slogans of political campaigns, Milunovich suggests companies should try to be closer to the winning banner of the Obama camp — “Forward” – rather than the limp Romney slogan “Believe in America.”

In the venture capital world, entrepreneurs are urged to condense their company pitch into an elevator speech. In the public company world, tag lines or slogans (memorable phrase as a repetitive expression of an idea) are used to quickly communicate company differentiation. We think tag lines can provide insight into management thinking. Perhaps more important than a tag line influencing customers is whether management is able to state its differentiation succinctly. Tag lines are the tweets of strategy.

Milunovich notes there’s precedent for CEOs taking responsibility for marketing, writing “Bill Hewlett famously said that marketing is too important to leave up to the marketing people. Marketing arguably is strategy.”

And Milunovich notes the muddle at Yahoo! (YHOO) at the moment over what its identity should be:

Currently new CEO Marissa Mayer is trying to figure out what Yahoo is. She said in The New York Times that “The most important thing is to give end users something valuable, inspiring, and delightful that makes them want to come to Yahoo every day.” Perhaps, but those are abstract, non-differentiating words. We believe the best strategies and tag lines are built on concrete differences, which requires focus. When Steve Jobs stopped in to Yahoo, he advised prioritization—if you could do only one thing, what would it be?

Milunovich likes what’s going on with IBM:

IBM: Big Blue sometimes refers to its strategy as “innovate and integrate,” which we like in underscoring the company’s unique R&D and solutions capabilities. We think that easily could be a tag line. IBM’s ad campaign around Smarter Planet seems pretty good in describing the company’s deep vertical solutions expertise. Few companies can match IBM’s product and geographic breadth (not to mention its world’s largest math department aiding analytics)

He’s concerned about how broad HP’s mandate is:

CEO Meg Whitman recently said that articulating strategy is her toughest task. In our view, the problem is that HP is in practically every IT business— how can the company create one brand image or a single slogan? This complexity is one reason we think HP should break up. Whitman has referred to HP as the only end-to-end solutions company, but we don’t think CIOs go out to buy cloud computing because the same supplier sells PCs. HP was early in cloud and converged infrastructure, perhaps there is something there. In his column on political tag lines, Al Ries picks up on the challenge HP faces, noting that when Whitman ran for governor in 2010 her campaign theme was “A new California,” a meaningless phrase. He considers HP’s current tag line “Make it matter” only slightly better than “A new Hewlett-Packard.”

And he thinks the message at Apple has gotten less successful without Jobs’s marketing flair:

When Steve Jobs returned to Apple, he immediately cut back on the number of product lines to focus the company. Over the years, Apple has had great product tag lines, such as “1,000 songs in your pocket” for the iPod and “The Internet in your pocket” for the iPhone (which hinted that it is a portable computer rather than a phone). Also effective were the “I’m a Mac, you’re a PC” series with 66 TV spots that promoted PC-to-Mac switching. Apple has lost some of the magic though. Former Apple exec Jean-Louis Gassee argues that recent ads have missed the mark. Playing up the unique support of the Genius bars should have been a no-brainer, but the ads came up short and were pulled. Similarly, the Siri ads fell flat. Meanwhile, Samsung successfully got across the point that Apple’s hardware lead has been diminished if not reversed. In response, perhaps Apple needs to move beyond product advertising to explain the benefits of the ecosystem and overall customer experience since playing the spec game is getting tougher. Although investors are concerned about the loss of Jobs’ product vision, his advertising touch may be equally important.

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There are 29 comments

NOVEMBER 12, 2012 11:41 A.M.

imurphit wrote:

Apple will be fine. Just BUY when all the analyst are saying SELL, because they are buying. Over 100 Billion reasons not to sell! Enjoy the buying of a lifetime.. PANIC Please set in, I want your shares cheap.

NOVEMBER 12, 2012 11:42 A.M.

Johny Ives wrote:

iFORWARD. Stay tuned... One more thing...

NOVEMBER 12, 2012 11:47 A.M.

freddysrevng wrote:

"the Siri ads fell flat" - do you think that might have had anything to do with the fact that most peopl felt that the Siri ads were "false advertising"....

Siri came nowhere near the bizarre adaptations of its abilities as portrayed by Samuel Jackson et al. Gotta hand it to him though - he's a "good actor".

Enter BB 10

NOVEMBER 12, 2012 11:53 A.M.

Marc wrote:

Apple stores are jam packed. Apple still can't make product fast enough. Sure...time to sell. Bear spin is all this is. Lots of shorts and lots of sour grapes who missed out. Hope they cover in time as apple will make it through $1000 per share even if it does so at a very low multiple. It trades cheaper then cisco, microsoft, P&G, Wal-Mart and almost trades on a forward ex-cash basis equal to HP who is left for dead

NOVEMBER 12, 2012 11:53 A.M.

applet wrote:

(Apple ad)
Line of people waiting for iPhones see two Samsung Users bump phones - 'what did you just do?'
" oh, I just gave him the latest android malware."
'Gee, I wonder when we get to do that....'

NOVEMBER 12, 2012 12:08 P.M.

TruthSeeker wrote:

There are none so blind as those who will not see. The Apple Toy Company NEVER had any real advantage over its competition but insisted on charging 50% more for the their products that were often inferior to their competiton - just as they are now. That's exactly why the Android phones now have 75% of the smart phone market, Windows still has over 90% of the PC market, and Apple stock is crashing and will continue to sink. Windows 8 is dynamite, as is the Surface tablet. The war has just begun and Apple is sure to lose.

NOVEMBER 12, 2012 12:23 P.M.

maoyee wrote:

#1 for APL is to grap mobile phone mkt share as much as possible.

NOVEMBER 12, 2012 12:38 P.M.

Rottan Frewt wrote:

Today, Apple shares continue to crater, but the blind fanbois continue to yell, "BUY APPLE!" Both Amazon and Google are raping Apple to shreds with no end in sight. By the time the New Year gets here Apple will be down around $500 and the Apple bulls will still be yapping about the so-called Apple Slingshot Theory. They need to change it to the Apple Quicksand Theory. The more shareholders struggle, the deeper they sink. Apple shareholders are already chest deep and will soon have only their head sticking out before they're completely covered in muck

Analysts have been pounding the table and lying through their teeth as investors dump Apple shares on a daily basis. Who would be foolish enough to believe Apple shares will ever rise again except life-long Apple bulls? With Tim Cook at the helm, Apple is in a tailspin from which they'll never recover. The company may make as much money as ever, but Wall Street believes that Apple's days are numbered and that's what matters. Apple stores might be jam-packed but the consumers can't buy anything because of Tim Cook's lousy supply chain control. All products are out of stock. Come back after Christmas. See you at $500.

NOVEMBER 12, 2012 12:44 P.M.

Wormy Apple wrote:

Apple is done for. Everyone has been selling their Apple shares since the iPhone 5 went on sale. The critics hated it and Wall Street saw the writing on the wall. The analysts are saying buy because they're selling and Apple is falling faster by the day.

NOVEMBER 12, 2012 12:50 P.M.

Anonymous wrote:

I'm a big fan of Jean Louis Gassee. Too bad he's not CEO. He's cool.

NOVEMBER 12, 2012 12:52 P.M.

Ima Messup wrote:

Samsung is selling tens of millions of Galaxy S IIIs a month. Apple doesn't have any iPhone 5s in stock because Foxconn can only make about one thousand iPhone 5s a day. The reason? They're too hard to assemble. Thank the Apple CEO for putting Apple out of business. Apple is heading for $400.

NOVEMBER 12, 2012 1:06 P.M.

Anonymous wrote:

If Marissa Mayer had to do to one thing to make Yahoo better then be better than Google. And make privacy a default feature. What's so hard about that.

NOVEMBER 12, 2012 1:17 P.M.

Anonymous wrote:

News today is that Samsung is now charging Apple 20% more for chips etc.. You would think they'd have made enough money charging the US Military protecting them while they hid in Japan. Gotta love that Google.

NOVEMBER 12, 2012 1:24 P.M.

Kev wrote:

It's hilarious whenever anything APPL gets discussed. There is always a few Apple fans who take the smallest criticism of the company as the greatest personal insult of all time. Just because their stock price has fallen doesn't mean the company isn't going to exist, or stop making iProducts... It just means that the market in general doesn't see the company as being worth $700 per share. If you take a step back and leave any personal biases out of the equation, you'll see that yes, Apple's big sellers (iPhone and iPad) did create a totally new standard for mobile phones and tablet computers. But Android and Windows 8 have taken those markets and improved them.

It's standard econ. Both those markets are in a mature phase, and companies compete on A) price, or B ) product differentiation, or both. Apple has always tried to compete using B, using product differentiation to justify a higher price. But that strategy only works when the market perceives your product as being better than everything else. And again, you've got to be unbiased to see it, but Apple products aren't that different than anything running Android or Windows 8. All three systems provide the same basic services: Internet, phone, messaging, maps, a camera and a media player. Other than that, the main difference is user interface. And of course, price.

Now if you are an Apple fan, you are probably willing to pay a price premium because of brand loyalty. If you are, for lack of a better term, a "rational consumer", you won't. Why? Substitute products. Like I said, they all do the same thing, but other brands do it for less money. And despite what Apple claims, their products don't make things so much easier that they are worth shelling out the extra money for essentially the same experience. Don't believe me? Go to a BestBuy and play with iOS, Android, and Windows 8. Internet is Internet. Talking on a phone just doesn't change between the three. Texting, whatsapping, etc., all work the same. Again, the only significant difference is the user interface, which anyone can learn in 20 minutes.

Android and Windows 8 are competing using both a lower pricing strategy and slight product differentiation strategy. When Apple originally released the iPhone and iPad, they could basically ask any price they wanted. Nobody could touch iOS. So everyone bought iProducts. But tech out dates itself so fast that when consumers decide to purchase a new product, they don't want the same thing they got last time. They want something newer and better, and if better isn't available then they at least want to get a deal. iOS hasn't really changed at all over the last few years, which is great because it works well. It's bad for Apple though, because Android and Windows recognized iOS as being better than what they could do a few years back. However, they looked at what was good about iOS and then took those concepts and improved them. And then they released them on a ton of different platforms at a lower price point. Like it or not, iOS is stale and outdated in the lifespan of tech. Yes it works, but Android keeps getting better. Windows 8 is totally new and fresh. iOS is iOS. iOS 4 = iOS 6 in the eyes of the "rational consumer". There's your slight product differentiation. Like I said, they all do the same thing. But the UI of iOS doesn't command the same price premium that Apple is unwilling to budge from.

Truthseeker hit the nail on the head regarding their comment on over inflated pricing. Apple will never gain as much market share as it potentially could so long as it fails to see this. Will the company survive? Yes. Will it keep making iProducts? Yes. Will they still sell well? Probably, but not to the same degree they did over the last few years. And be honest with yourself, if Apple keeps advertising itself as a premium product, it's only going to attract a crowd of people who desperately need premium everything. Most people just don't care. A phone is a phone. If one costs $700 and one costs $500, and they do the same thing, 90% of people will go for the $500 phone.

NOVEMBER 12, 2012 1:53 P.M.

freddysrevng wrote:

@ Kev - Good write up, but you forgot RIMM. When BB 10 comes out, Q1 2013, iOS will "OFFICIALLY be the oldest, crustiest, and most boring OS in mobile".

Telling.... Regardless of the what basher iTard Herb Greenstein says...

Enter BB 10

NOVEMBER 12, 2012 2:17 P.M.

Honest Abe wrote:

The rest of the market going up. Apple is still in a freefall. Soon to be at $500. Disappointing iPhone 5 and iPad Mini sales aren't helping Apple one bit. Apple is wheezing while standing in place. I'd heard that Apple insiders are selling their stock because they know this is the end of Apple. They have absolutely no faith in Tim Cook. All of Wall Street knows except maybe Dediu and Zaky that Apple is facing its end. Every news article is negative about Apple's chances of survival against Android and Windows 8. Apple's stock has collapsed and the company has no decent products in the pipeline without Steve Jobs. That's why everyone who has any sense is dumping Apple shares. Buying Apple while everyone else is selling is a great way to lose your retirement money. Apple has become H-P thanks to Tim Cook.

NOVEMBER 12, 2012 2:31 P.M.

Ron wrote:

Apple is done

NOVEMBER 12, 2012 2:40 P.M.

Tim wrote:

I think Wallstreet said to Mr. Cook, your deal sux.

NOVEMBER 12, 2012 2:50 P.M.

Allison wrote:

Funny, Apple settles with HTC, Google is up 6, Apple is down 6 and Samsung is laughing.

NOVEMBER 12, 2012 3:45 P.M.

Bob wrote:

Microsoft should now buy Apple. Ballmer
will run the new company

NOVEMBER 12, 2012 4:25 P.M.

danielle wrote:

You guys are joking, Windows 8 Surface tablet? Steve Ballmer today said sales "have been modest" (his words). On the other hand the iPad mini has a 2 week order backlog of all models and no known production issues. On top of that, Apple will sell around 50 million iPhones this quarter, an all time record.

I wouldn't buy into that sales data for iphones too much. If you remember when the iphone 4 launched, blackberry's were still selling like hotcakes. People weren't too concerned with BB because of this. But look how fast that changed. iPhones aren't cool anymore. They're safe. That's why people will still buy them. But with technology innovators buying the newer phones, it's not going to be long before people coming to the end of their phone contracts see the cool new phone their friend has, and then pick that up instead of an iphone. It's a lot easier to let your friends test new devices and give the A-OK before making the switch yourself. BBM sold blackberry's to consumers. It was the cool thing at the time. Then iOS was cool and replaced BBM. Now Windows and Android are the cool thing to have. People put way too much faith into sales data and fundamentals when it comes to analyzing technology stocks dealing with mobile phones. They really mean next to squat with an industry that changes this rapidly. The biggest factor has been and will always be what the mass public sees as cool. Cause if it ain't the cool thing to have anymore, it gets slammed. I remember people were arguing about RIM the same way they argue about APPL now. Fundamentals, sales data, etc., said RIM was fine. RIM was not fine.

NOVEMBER 12, 2012 4:48 P.M.

Ed wrote:

Once again , Wall Street the Pimp shows
Tim Cook who is running the show. Cook
and Apple are the Whore of Wall Street.

NOVEMBER 12, 2012 4:59 P.M.

Word wrote:

Now Samsung and Google will bury Apple
and Tim Cook

NOVEMBER 12, 2012 5:08 P.M.

Sal wrote:

Tim Cook is a Pussy. Has no stones and
is weak. A CEO he is not

NOVEMBER 12, 2012 5:10 P.M.

Sunshine 88 wrote:

Most folks have chosen Android for cost. That era is over. With a two year contract an iphone 4 costs $.99. I encountered a young women getting her iphone 4 replaced at the genius bar. She had wanted an Android but couldn't afford it. Her father was adding her to his family plan. She said she could only deam of coming up with $100 to get something else so she was forced to chose an iphone 4.
Andtoid makes no profit now. Whats a $.99 iphone 4 gonna do to them. Android ... be afraid, be very afraid.

NOVEMBER 12, 2012 8:51 P.M.

James wrote:

Apple offering better employee perks
No crap, because their stock options
are underwater and they see the stock
going south quick, so they are heading
for the hills and regardless of what Cook
does, it's too late. He has lost them.

NOVEMBER 12, 2012 11:06 P.M.

Paulo Lin wrote:

Bottom line, Apple is now "passé" as someone said iOS is boring and dull. For the guy who called Andoid Malware, WTF are you talking about!?!? Android is far superior to the dull iOS and people now see the difference. I dare you to change to Android and you'll never go back to the boring iPhone. Unfortunately, the iSheeps of the world "or should I say Apple Minions" see black and white (just like iOS)

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.